03-30877. Collection of Claims Owed the United States Arising From Activities Under the Commission's Jurisdiction

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Commodity Futures Trading Commission (Commission) proposes to revise its regulations governing the collection of claims owed to the United States arising from activities under the Commission's jurisdiction. The proposed revision implements the administrative wage garnishment provisions of the Debt Collection Improvement Act of 1996 (DCIA). The DCIA authorizes Federal agencies to collect money from a debtor's disposable income by means of administrative wage garnishment. Prior to enactment of the DCIA, a court order was required for an agency to garnish a debtor's wages. In accordance with the requirements of the DCIA, the procedures being proposed by the Commission to garnish wages administratively are based upon, and consistent with, implementing regulations issued by the Department of the Treasury.

DATES:

Comments must be received by January 14, 2004.

ADDRESSES:

Comments should refer to “Proposed Administrative Wage Garnishment Rules” and be submitted to the Office of the Secretariat, Commodity Futures Trading Commission, Three Lafayette Center, 1155 21st Street, NW., Washington, DC 20581.

FOR FURTHER INFORMATION CONTACT:

Stephen Mihans, Esq., Office of General Counsel, Commodity Futures Trading Commission, at [phone] or [e-mail].

SUPPLEMENTARY INFORMATION:

I. Background

Part 143 of the Commission's regulations, 17 CFR part 143, sets forth the Commission's policies and procedures for collecting debts owed to the United States arising from activities under the Commission's jurisdiction. At present, the part 143 rules, which apply to debts owed by persons not employed by the Federal government, authorize collection by (1) administrative offset against obligations owed to the debtor by the United States, (2) compromise (if the debt owed is not more than $100,000), or (3) referral to the Department of Justice for litigation.^[1] The part 143 rules were first published in 1985 (50 FR 5383) to implement the Federal Claims Collection Act of 1966, as amended by the Debt Collection Act of 1982, 31 U.S.C. 3701, et seq. They were amended in 1992 (57 FR 61291) to increase the maximum dollar amount of claims that the Commission itself may settle, and again in 1996 (61 FR 55564) and 2000 (65 FR 45709) to adjust for inflation the maximum dollar amount of civil penalties assessable for violations of the Commodity Exchange Act and the Commission's regulations and orders.^[2]

As a result of the Department of the Treasury's issuance of regulations implementing the administrative wage garnishment provisions of the DCIA, the Commission is proposing to further amend its part 143 rules. Under the DCIA, the head of a Federal agency administering a program that gives rise to a delinquent non-tax debt owed to the United States by an individual may garnish the individual's disposable pay to collect the amount owed. See 31 U.S.C. 3720D. On May 6, 1998, the Financial Management Service (FMS),^[3] a bureau of the Department of the Treasury, promulgated regulations (63 FR 23156) establishing rules and procedures governing administrative wage garnishment by Federal agencies. See 31 CFR 285.11. Agencies that wish to use administrative wage garnishment to collect delinquent debts must comply with all of the requirements set forth in 31 CFR 285.11. They are permitted, however, to prescribe their own rules for the conduct of administrative wage garnishment hearings, so long as the rules are consistent with criteria set forth in 31 CFR 285.11(f).

The Commission's proposal would revise existing Rule 143.1 by adding administrative wage garnishment to the list of available debt collection procedures. Existing Rules 143.2 through 143.8, which address the collection of delinquent debt through administrative offset, compromise, or referral to the Department of Justice for litigation, would be grouped together as subpart A, “General Provisions.” To address the collection of delinquent debt through garnishment of the debtor's wages, a new subpart B, “Administrative Wage Garnishment,” would be added to part 143. In addition to these changes, the Commission's proposal would correct citations in part 143 to the Federal Claims Collections Standards to reflect their transfer from part 4 to part 31 of the Code of Federal Regulations and make other editorial changes of a non-substantive nature.

II. Overview of Proposed Wage Garnishment Procedures

Under proposed Rule 143.9, administrative wage garnishment proceedings initiated by the Commission would be governed by the FMS regulations codified at 31 CFR 285.11.^[4] Those regulations allow the Commission to garnish the disposable pay of any individual, other than an employee of the Federal government, who owes a delinquent non-tax debt to the United States arising from an activity within the Commission's jurisdiction. 31 CFR 285.11(d). At least 30 days before a garnishment proceeding is initiated, the Commission (or FMS, acting on the Commission's behalf) will send the debtor written notice informing him or her of the nature and amount of the debt and the Commission's intention to collect it through deductions from the debtor's pay, and explaining the debtor's rights with respect to the proposed action. 31 CFR 285.11(e)(1).

The debtor will be given an opportunity to inspect and copy Commission records related to his or her debt, to enter into a written repayment agreement on terms acceptable to the Commission, and to request a hearing concerning the existence or amount of the debt or the terms of the repayment schedule. 31 CFR 285.11(e)(2). If a hearing request is received within 15 business days after the Commission's notice is mailed to the debtor, a hearing must be held before a garnishment order can be issued. 31 CFR 285.11(f)(4). For hearing requests not received within 15 business days, the Commission need not delay the issuance of the garnishment order prior to conducting a hearing. 31 CFR 285.11(f)(5). The Commission may not garnish the pay of a delinquent debtor who has been involuntarily separated from employment until he or she has been reemployed continuously for at least 12 months. 31 CFR 295.11(j). The debtor bears the burden of informing the Commission of the circumstances surrounding an involuntary separation from employment.

Within 30 days after a delinquent debtor fails to make a timely request for a hearing or, if a timely request is received, within 30 days after a final decision is made to proceed with garnishment, the Commission (or FMS, acting on the Commission's behalf) will mail a wage garnishment order, in a form prescribed by the Department of the Treasury, to the debtor's employer. 31 CFR 285.11(g). The order will direct that the employer pay a specified portion of the debtor's wages to the Federal government. Along with the order, the Commission (or FMS, acting on the Commission's behalf) will send a certification form, to be executed by the employer, addressing such matters as the debtor's current employment status and the amount of disposable income available for garnishment. 31 CFR 285.11(h). Although the employer must promptly pay all amounts that are required to be withheld from the debtor's pay, the employer will not be required to alter its normal pay cycle in order to do so.

As provided by the DCIA, no more than 15 percent of a delinquent debtor's disposable income may be garnished for each pay period. A debtor may, at any time, seek review by the Commission of the amount being withheld under an administrative wage garnishment order, based on materially changed circumstances (such as disability, divorce, or catastrophic illness) which result in financial hardship. The DCIA makes it unlawful for an employer to take disciplinary action against an employee based on the fact that the employee's pay is subject to administrative wage garnishment. In addition, it authorizes the Commission to sue an employer for amounts that are not withheld under a garnishment order.

III. Administrative Wage Garnishment Hearings

If a delinquent debtor requests a hearing concerning the existence or amount of his or her debt or the terms of repayment set forth in the garnishment order, the hearing will be conducted by the Commission in accordance with the requirements of 31 CFR 285.11(f). Under proposed Rule 143.10, the Commission would authorize its Executive Director (or any Commission employee designated by the Executive Director) to decide whether the hearing will be oral or in writing, and to select a qualified and impartial employee of the Commission to conduct the hearing and render a decision. Consistent with the requirements of 31 CFR 285.11(f)(10), the Commission's proposed rules require that a decision be issued within 60 days after the Commission's receipt of the debtor's request for a hearing. The hearing official's decision would be the final agency action for purposes of judicial review under the Administrative Procedure Act, 7 U.S.C. 701, et seq.

The proposed rules state that, at the hearing, the Commission has the burden of going forward to prove the existence and amount of the debt. Depending on his or her claims, the debtor then would have to establish, by a preponderance of the evidence, that no debt exists or the amount of the debt is incorrect, that the terms of the repayment schedule are either unlawful or would cause a financial hardship to the debtor, or that collection of the debt may not be pursued due to the operation of law. Although the FMS regulations require only that a “summary record” of the hearing be maintained, proposed Rule 143.10 would require that all testimony adduced at an oral hearing be transcribed on the record and under oath or affirmation, and that all documents presented for consideration by the hearing official be marked as exhibits and retained in the record.

IV. Related Matters

A. Administrative Procedure Act

The proposed amendments to the Commission's part 143 rules governing debt collection relate solely to agency organization, procedure, and practice. Therefore, the provisions of the Administrative Procedure Act, 5 U.S.C. 553, generally requiring notice of proposed rulemaking and opportunity for public comment, are not applicable. Moreover, because the rules implement a definitive statutory scheme established by the DCIA, notice and an opportunity for public comment are not required. However, since the proposed amendments represent an additional tool in the Commission's debt-collection efforts, the Commission has determined that it would be useful to receive comments from any interested members of the public before proceeding to final rulemaking.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601-611, requires that, in proposing rules, agencies consider the impact of those rules on small businesses. Since the proposed rules are not being effected pursuant to 5 U.S.C. 553, the analysis and certification process mandated by the RFA do not apply. In any event, the Chairman, on behalf of the Commission, certifies that the proposed rules will not have a significant economic impact on a substantial number of small businesses. Although an employer of a delinquent debtor will have to certify certain information about the debtor, such as the debtor's employment status and current earnings, this information is already contained in the employer's payroll records. Moreover, an employer would not be required to vary its normal payroll cycle to accommodate an administrative wage garnishment order.

C. Paperwork Reduction Act

The proposed part 143 rules do not impose a burden within the meaning and intent of the Paperwork Reduction Act of 1980, 44 U.S.C. 3501, et seq.

D. Cost-Benefit Analysis

Section 15(a) of the Commodity Exchange Act, 7 U.S.C. 19(a), requires the Commission to consider the costs and benefits of its action before issuing a new regulation. The Commission understands that, by its terms, section 15(a) does not require the Commission to quantify the costs and benefits of a new regulation or to determine whether the benefits of the proposed regulation outweigh its costs. Nor does it require that each proposed rule be analyzed in isolation when that rule is a component of a larger package of rules or rule revisions. Rather, section 15(a) simply requires the Commission to “consider the costs and benefits” of its action.

Section 15(a) further specifies that costs and benefits shall be evaluated in light of five broad areas of market and public concern: Protection of market participants and the public; efficiency, competitiveness, and financial integrity of futures markets; price discovery; sound risk management practices; and other public interest considerations. Accordingly, the Commission can, in its discretion, give greater weight to any one of the five enumerated areas of concern and can, in its discretion, determine that notwithstanding its costs, a particular rule is necessary or appropriate to protect the public interest or to effectuate any of the provisions, or accomplish any of the purposes, of the Commodity Exchange Act.

The proposed administrative wage garnishment rules are not related to the marketplace and thus should not affect the protection of market participants; the efficiency, competitiveness, and financial integrity of futures markets; price discovery; or sound risk management practices. These proposed rules, however, do address other public interest considerations, namely, the collection of debts owed to the United States arising from activities under the Commission's jurisdiction. The costs associated with implementing administrative wage garnishment, which are mandated by the DCIA and 31 CFR 285.11, will be small. On the other hand, the benefits include providing an additional means to prevent persons who have been found liable for violating the Commodity Exchange Act or the Commission's regulations or orders from avoiding payment of monetary sanctions lawfully imposed on them.

List of Subjects in 17 CFR Part 143

• Civil monetary penalty
• Claims

In consideration of the foregoing, the Commission proposes to amend chapter 1 of title 17 of the Code of Federal Regulations as follows:

PART 143—COLLECTION OF CLAIMS OWED THE UNITED STATES ARISING FROM ACTIVITIES UNDER THE COMMISSION'S JURISDICTION

1. The authority citation for part 143 is revised to read as follows:

Authority: 7 U.S.C. 9 and 15, 9a, 12a(5), 13a, 13a-1(d), and 13(a); 31 U.S.C. 3701-3720E; 28 U.S.C. 2461 note.

2. Section 143.1 is revised to read as follows:

§ 143.1

Purpose.

This part provides procedures that the Commission will use to collect debts owed the United States arising from activities under the Commission's jurisdiction. As applicable, these procedures are based upon, and conform to, the Federal Claims Collection Act, as amended, 31 U.S.C. 3701-3720E; the Federal Claims Collection Standards, 31 CFR parts 900-905, issued by the Department of the Treasury and the Department of Justice; administrative wage garnishment regulations issued by the Department of the Treasury, 31 CFR 285.11; and other laws applicable to the collection of non-tax debts owed to the United States arising from activities under the Commission's jurisdiction. Subpart A describes procedures for collection by offset against obligations of the United States to the debtor, by compromise, and by referral to the Department of Justice for litigation. It also sets forth the Commission's policy on collecting interest on unpaid claims, the method used in calculating such interest, and the maximum inflation-adjusted civil monetary penalties that may be assessed and enforced for each violation of the Commodity Exchange Act or regulations or orders of the Commission promulgated thereunder. Subpart B describes procedures for collection by administrative garnishment of the debtor's wages.

3. Sections 143.2 through 143.8 are designated as subpart A of part 143, and a new heading, “Subpart A—General Provisions,” is added above section 143.2 to read as follows:

Subpart A—General Provisions

4. Section 143.2 is amended by revising paragraph (c) to read as follows:

§ 143.2

Notice of claim.

* * * * *

(c) If no response or an unsatisfactory response is received by the date indicated in the notice, the Commission may take further action as appropriate under the Commodity Exchange Act or regulations thereunder, or under 31 CFR parts 900-905 or the Federal Claims Collection Act, as amended, 31 U.S.C. 3701-3720E.

5. Section 143.7 is amended by revising paragraph (a) to read as follows:

§ 143.7

Delegation of authority to the Executive Director.

(a) The Commission hereby delegates, until such time as the Commission orders otherwise, to the Executive Director or to any Commission employee under the Executive Director's supervision as he or she may designate, authority to take action to carry out subpart A and subpart B of this Part and the requirements of 31 CFR parts 900-905 and 31 CFR 285.11.

* * * * *

6. A new subpart B consisting of §§143.9 and 143.10 is added to part 143, to read as follows:

Subpart B—Administrative wage garnishment

§ 143.9

Administrative wage garnishment orders.

Whenever an individual owes the United States a delinquent non-tax debt arising from activities under the Commission's jurisdiction, the Commission, or another federal agency collecting the debt on behalf of the Commission, may initiate administrative proceedings to garnish the disposable income of the delinquent debtor in accordance with the requirements of, and the procedures set forth in, 31 CFR 285.11. The Commission's use of other debt-collection measures set forth in subpart A of this part does not preclude the initiation of an administrative wage garnishment proceeding against a delinquent debtor.

§ 143.10

Garnishment hearings.

Any oral or written hearing required to establish the Commission's right to collect a delinquent debt through administrative wage garnishment will be presided over by a hearing official designated by the Executive Director. Any qualified and impartial employee of the Commission designated by the Executive Director may serve as a hearing official. All documents presented to the hearing official for his or her consideration shall be marked as exhibits and retained in the record. All testimony given at an oral hearing, either in person or by telephone, shall be under oath or affirmation. A transcript of the hearing shall be prepared and made part of the record.

Issued in Washington, DC, on December 9, 2003, by the Commission.

Jean A. Webb,

Secretary of the Commission.

Footnotes

1.  The collection of debts owed to the Commission by its current employees or by the employees of other Federal agencies, and of debts owed to other Federal agencies by current Commission employees, is separately governed by part 141 of the Commission's regulations, 17 CFR part 141.

2.  The 1996 and 2000 amendments to the Commission's part 143 rules implemented the Federal Civil Penalties Inflation Adjustment Act of 1990 (FCPIAA), as amended by the DCIA. The FCPIAA and the relevant amendments made to the FCPIAA by the DCIA, are codified at 28 U.S.C. 2461 note.

3.  On August 27, 1999, the Commission entered into a cross-servicing agreement with the FMS, which allows the FMS to undertake debt collection activities on behalf of the Commission. It is anticipated that, pursuant to that agreement, the FMS also will assist the Commission in collecting delinquent debts through administrative wage garnishment.

4.  The Commission's use of other debt-collection measures set forth in subpart A of the part 143 rules would not preclude it from initiating an administrative wage garnishment proceeding against a delinquent debtor.